Midterm Exam - UNIVERSITY OF CALIFORNIA HAAS SCHOOL OF...

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UNIVERSITY OF CALIFORNIA HAAS SCHOOL OF BUSINESS EWMBA 201A—Economic Analysis for Business Decisions Fall 2009 Felix Várdy MIDTERM EXAM Instructions: The numbers in brackets indicate the points for each question. Total: 100 points + 10 bonus points. You only have 90 minutes to do the exam, and I do not expect everybody to be able to finish all the questions. So be strategic about which questions you choose to answer and how much time you spend on each of them! Please Write Legibly. Briefly explain your answers (that is, don’t just write “yes” or “no” and don’t just write down a numerical answer without showing how you derived it). Correctly annotate graphs and figures. 1. [25 Points] Martha has a vineyard which she can use for two purposes that year: tourism and wine production (the tourists steal the grapes so she cannot do both). If she produces wine and the weather turns out to be good, she generates a profit of $25,000. If she produces wine and the weather is bad, she generates a profit of $5,000. If she dedicates her vineyard to tourism and the weather is good, she generates a profit of $15,000. If she dedicates her vineyard to tourism and the weather is bad, she generates a profit of $10,000. The probability that the weather is good is only ¼.
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